tv Closing Bell CNBC September 18, 2009 3:00pm-4:00pm EDT
subsidiary business, it all depends on the price. >> i like the story just the way it is. but a value-added subsidiary could also be a good thing. i would be very comfortable if they stayed right with the regional markets and continued to pursue those growth opportunities. >> reporter: now, year-to-date, penn outperformed, but underperformed the gaming. there you can see the charts. boyd a little better, penn not quite as good. whoever buys the fontainebleau will face a flood of rooms coming on the market as the mirage opens up and hard rock 3 is in expansion. there are two other potential buyers fontainebleau is talking to. phil told me this week he is, this month, he is looking to buy in vegas, maybe even on the strip. again, he really wants it, though, on the cheap. like distressed squared. distressed cubed. we'll have to see what the
fontainebleau is willing to sell for. >> the "closing bell," let's hand it off to them. s.e.c. chair mary shapiro said the s.e.c. and cftc would bring efficiencies. the treasury will let a year-old money market fund guarantee program expire today, saying it's no longer needed. it also says the program made a profit for taxpayers. partsmaker visteon is asking to abandon contracts with gm. that's cnbc.com news now. first in business worldwide, i'm bertha coombs. there it is. the new york stock exchange. friday afternoon on wall street. we finish the week on a high note as we enter the final stretch on wall street. hi, everybody, welcome to the
"closing bell." i'm maria bartiromo, along with scott wapner today. the bulls in charge, taking this rally home as we approach the final stretch. and financials, once again, the key groups on the up side. >> dow back above 9800. the dow up more than 200 points, maria. >> amazing. you've got the dow and nasdaq on track for the weekly gains since july 24th. >> proctor & gamble, the leadership on the dow. >> for the nasdaq, you've got pretty good movement in technology. still higher by about eight points. technology the strongest sector. >> that was leading the stocks higher. >> we've got leadership. you mentioned hewlett-packard. analysts meeting coming up in the next week and a half. that's something people will focus on. oil prices actually pulling down fractionally. >> i want to talk with our guests about the dollar and
dollar strengthening a little bit. >> inflation trade, commodities, gold, oil, copper, et cetera. >> she called it. m.b. called it. >> our team is covering it. up in chicago, we begin with bob pisani, on the floor of the new york stock exchange. >> i know it doesn't look terribly exciting, folks, but it's very significant. markets in the last hour, big volume today. quadruple, not a lot of surprise. not a lot of volatility. the big story, folks, aren't you watching? we're up every day. eight out of ten days. i know, it doesn't look like much, 20, 30 points on the dow, all of a sudden the dow is up 200 points this week. the best showing in almost two months here. we're sitting at new highs for the year on all the major indices. we're getting a rebounding this afternoon. we had it in europe with some of the indices over there. the daq, ftse in london rebound.
a little gyrations in the stocks in the middom of the day. the trade over in europe as well. budweiser, anheuser-busch, gyrated around 11:30 eastern time, the stock went down, and up. all of a sudden right in the middle of the day. novartis had an interesting move here. trust me, the big story here at the close is going to be some of the big names like citigroup which is rebalanced. they had big moves into their common shares here from their preferred shares. coca-cola will also have an ad as well. finally, is there a lot of cash on the sidelines? that would be what you would think. here's the answer to this question. there is cash, but less than there used to be. right now, 30% is the ratio. money market funds, u.s. equity capitalization. that is high by historic standards, the average is 20%. back in march, nearly 50%. so there's cash, but not as much as there used to be. all that cash didn't necessarily
go into stocks, by the way. a lot of it went into, of course, what do you think, bond funds, as well as just paying bills. over at the nasdaq, brian, we're also up about 2%. new highs for the years as well. >> we're up 0.4%. i want to bring up the sector leading back to the lehman disaster. it's basically been flirting, actually, we don't have the graphic, it's the only sector close to positive since lehman. it turned positive briefly today. and it's been close. research in motion, up 1.1%. oracle, close to 1%. scott wapner mentioned it, at the top, intel, sandisk, leading the chips to the upside. bank of america, merrill lynch, the price target of 30. so there's room to run there. 52-week highs. a lot of them. i'll show you the range. a lot of different types of companies on the nasdaq. starbucks up 3.2%, hit a 52-week high.
juniper, shows the range of companies that hit 52-week highs. to the down side, yahoo! they're struggling, in china, with their own brand, what are they going to do moving forward. dell down 1%. obviously some dilution involved there. i also want to point out there was -- goldman had a note out on discount brokers. schwab had to sell, that's down. but they have buy on e-trade, up 7.6%. the number one volume stock on the nasdaq. just incredible volumes. like feed the beast by the broker and there's a lot of volume. >> we don't have the charts to show you, but a lot to tell you about oil to look ahead for next week. oil prices today were down on the session, around $72 a barrel is where we settled. but they gained 4% on the week. again, chart's not there, but take my word for it. oil prices next week they'll
show the october futures contract expiring on tuesday. geopolitics, a round president coming to the u.n. next week. as always, the dollar and stock market, that could have an impact on where oil prices are headed. the big story, of course, has been natural gas in this market. natural gas prices surging over the last two weeks, over 50%. now, keep this in mind, if you look at the low for natural gas back on september 4th, around $250, to where we are now, that's about a $13 move in terms of crude oil dollars. that's a big move. think about oil prices right now, $85 a barrel. a lot of volatility in this market. a lot of folks say it's short covering. we'll see if it's really short covering or there are fundamentals in play. also, you want to take a look at gold and what has happened there. of course, gold is firmly above the $1,000 mark right now. there are a lot of folks who say, maybe next week will be the week that we test the march 2008 high. but there is weakness in the base metals. copper prices falling. a lot of inventory there.
and copper prices are down on the week. maria, back to you. >> sharon, thanks very much. >> let's break down the investments news right now. how to invest in this environment. jason, and rich peterson. gentlemen, good to see you. we're giggling a little too much. it is a friday, however. but we had a very good week for the markets overall. what are you looking for next week? >> i think, listen, maria, we're going into the earning season now. the thing we keep telling people is it's more dangerous to be short than to be long. i think that's because the economic news has clearly gotten better. i also think the earnings news ultimately is going to wind up being better. there's tremendous operating leverage in the system. companies aggressive in cutting costs. i think the other interesting story this week was gold. it's going to be one thing i'll be watching next week to see whether that continues. >> really?
you're talking about we're coming to the end of the quarter in the next couple of weeks. >> we're looking at september for the s&p. this is the best september so far since 1998 for september. the fact is, some managers are going to be saying, hey, we may not be matching those benchmarks, maybe we have to commit more capital in the waning trading sessions this month. we have head winds ahead of us. obviously 14 states have unemployment rates above 10%. a lot of mortgages are going to be reset. corporate earnings coming up in about three weeks. investors could have a little bit of pause going forward. >> is the potential strengthening of the dollar one of the headwinds you're talking about? the dollar has remained weak and helped this rally along. today the dollar strengthening. if naes a trend that starts to develop a little bit, what does that mean for the market? >> something to keep our eye on, obviously. the dollar has been depreciating, whereby, large monthly nationals are going to have foreign profits from their exports.
it may benefit the third quarter numbers when the report comes out in october. what we're concerned about also, just the treasury auctions next week. we're going to raise something over $200 billion of a series of auctions. so we'll be looking to see how that goes. >> jason, how are you investing right now in the environment? what's the portfolio look like? >> we have a barbell approach, we're overweight energy and basic materials. and we're also overweight consumer staples and health care. we like the base materials in energy becausicly because we think everybody's using public spending to fill holes in their domestic economies. we also like the stable growth aspects of health care and consumer staples. i would say, though, too, the extent to which the health care bill is in trouble, or much pared down, that could be a big lift to the health care stocks as we go through the fall. >> it's interesting, because we're talking about next week and the possible headwinds. rich mentions a good point in terms of the final two weeks of the quarter.
and you wonder what happened after that, given that we enter pre-announcement season for third-quarter earnings. we enter, you know, really the time that we get the evidence to back up this rally. >> the irany is that i would say a lot of our clients have been behind the benchmarks. everyone expected september to be weak, because it's seasonally weak as rich pointed out, but it didn't turn out. there might be more money chasing performance in the last two weeks of the quarter than trying to book profits. >> another worrisome find, the fact that that corporate identifiers. a request for, we have a system of global services. they're down year over year about 35%. a little tick-up of late. the trend going forward, they suggest that the benchmarks may have some trouble in the 2010 activities. >> what's that say, scott, the market climbs a woe of worries. >> you talked about some of the
headwinds we've been extending here. what about some of the pluses? m of a activity picking up. there's a lot of activity developing. >> we were a proponent of that. a correlation between gdp, and obviously a likely deal, or proposed deal between cadbury and kraft. one of the largest foreign acquisitions by a foreign company. deal flow is picking up. ipo activity is increasing. filings. we talked about carlisle ipo, private equity, doing portfolio. so those are a lot of positives. >> that's not surprising, though. when you have a better tone in the market, that's when companies want to come out and issue stocks. >> it will be a supply issue, it may not be the best thing but it does give you some idea that the tone has changed pretty significantly. listen, pi the end of this year, probably only a third of the stimulus money will have been spent. so you have that to look forward
to going into next year. the thing i'm watching, long-term treasury yields. if they started to back up meaningfully, that could short sur kit. >> you make a really good point. do we have the chart? this is something that i've been focused on. the baltic dry index is basically telling us what's being shipped, which is really what's happening in the economy. it is down to the lowest level, scott, since mid-may. down for the sixth day at $2,056. lower than the december lows. but it is now down 45% off the late may '09 highs. >> you look at something like the ism, that's up quite a bit. there's a series of other data that suggests the housing and autos may have bothered them temporarily. that tends to be very good news. the ism is a very strong correlation with corporate profits. the corporate profit news, i think, in the next couple weeks is likely to be better than expected. unfortunately we're getting a
lot of this through government stimulus. i don't know how sustainable it is. for the time being, it's hard to stand in front of it. >> give me a year-end target for the s&p, both of you. jason? >> 1150. >> and the s&p right now, 1,070. >> probably another 7%, 8%, something like that. >> higher than it is now. >> you're really going out on a limb here. >> i know i'll be wrong. but i think it's higher. i do think it's quite a bit higher. >> you're looking at a good year end? >> i think so. it will inevitably be better news. >> good to have you on the program as always. >> we have about 45 minutes to go before we close up the week. the dow up about 200 points on this week. good for about 50 right now. >> when we come right back, it's been one year since the start of the financial crisis. some would say it started
earlier than that with bear stearns. but lehman brothers went bankrupt one years ago. the risks and rewards of investing in that sector right now. the commercial real estate be the next shoe to drop in this economy. one watcher who isn't turning his back on that group just yet. also ahead, my one-on-one with president bill clinton. we'll talk about the state of the economy, as well as president obama's health care reform plan. all coming up at 4:00 p.m. eastern. dow up 50. eseseseseseseseses
welcome back. a year ago the credit markets froze up, but now the corporate debt market is booming. rebecca jarvis is here with a look at the climate for corporate debt and whether it's a good option for your money. >> hey, scott. what a difference a year makes. a year ago this time, the market for corporate debt was completely dead. fast forward to today and risk is coming down. deals are getting done. we're seeing a flood of new corporate credit coming to market and they're happening at terms analysts say have huge upside for investors, especially on the riskier side of the
business. yesterday was the biggest day for high yield pricing this year so far. the most active day for deals since january of last year. and with millions in credit flowing, companies from amr to kodak, blockbuster and mgm, they're reworking their covenants. while a lot of the capital is used for balance sheet repair right now, brian reynolds says if the trend continues, and they thinks it will, the asset liquidity will eventually goes toward growing the businesses. which will eventually lead to higher stock prices, from a technical perspective things are more positive. the last time the corporate debt was at these levels, the s&p 500 was trading 1400. significant default risk has also come out of the market. the cost of protection is falling. john fenn of citigroup said they point to a default rate of 7.5% to 8% over the next 12 months.
if that holds true, he said the market is still fundamentally cheap. he's also advising his clients to hold on to their corporate credit through the first half of next year. he's looking at early second half next year, as the time to sell credit, and go over totally to equity. maria, back over to you. have a great weekend. >> you, too. it was exactly one year ago that hank paulson and ben bernanke held an emergency meeting on capitol hill to discuss bailing out the banks. the federal reserve ingested $180 billion of liquidities to global financial system. one impact has washington's state of our banks, one year later is the sector worth investing in today. joining me to discuss this is one of the best watchers of this groups out there, guy. good to have you on the program. thanks for joining us. >> thanks, maria. >> you were at merrill lynch, now you're at bank of america securities. you're head of u.s. financial institutions research, bank of
america, you certainly have been the senior name on the group. can you give us a status check? how is the banking sector doing today? >> sure. i think you have to divide it up into names that are more credit sensitive and less credit sensitive. the traditional banks that have made a lot of corporate and consumer loans are still facing significant drags from the credit costs of those loans, the charge-offs. but they seem to be managing through for the most part. and on the capital market side, in terms of the ones i cover, gold man sachs, morgan stanley, almost a surprisingly rapid recovery of core earnings power. >> when you look at the market performance, though, these stocks have really run off since the lows certainly in march. do you think that the market has gotten ahead of itself in terms of performance or is it justified? >> no, i think a large measure it's justified. i think we're looking at valuations that were extraordinarily depressed because of the degree of uncertainty.
as that uncertainty has lifted, certainly we've seen a good recovery in share prices. you have to be a little selective and go with the right names. but for example, goldman sachs, clearly positioned to produce return on equity in the high teens to even 20%, which is their long-term goal. the stock isn't valued, actually, for anywhere near a 20% return on equity. >> so what are the sort of signposts that you're focused on right now? for a long time was, we need to watch the capital levels. then it was we need to see what kind of toxic assets are on the books. what are the most important metrics you're focused on? >> the banks that have significant credit exposures, where that's a major part of their business, like a jpmorgan or citigroup, what we're looking for most right now is at what point can they stop having to build reserves, because that affects earnings. at what point then after that will net charge-offs begin to stabilize. we think we're approaching that with a number of these banks,
especially if they don't have a tremendous amount of real estate exposure yet. we're looking for the degree of sustainability in the sustaining revenue. >> i want to ask you about commercial real estate in a moment. but first, on the capital levels, and on how much of a reserve these banks need, you know, they're in still that same position where the government is saying, you need to raise capital levels, but also saying you have to lend. so how do you do both and also get that reserve fund where you need it? >> that is a very fine line that the government has to walk as well as the companies. remember that the 19 banks that went through the stress test process, the largest banks in the united states, in many cases were forced to raise additional capital. and in order to exit t.a.r.p., a number of banks were also coerced to raise further amounts of capital. we're now looking at common equity, what we call pier one common of risk weighted assets.
that's double the actual regulatory requirement. so we're looking at the large u.s. banks actually being extremely well capitalized at this point, certainly in the global context compared to many of the european or japanese banks. >> are you worried about commercial real estate in 2010? do you think that presents the opportunity for another leg down for the system? >> it depends, of course, on the individual institution, but i would say systemically, probably not. the large capital market players have marked these positions to market and have pretty much adequately hedged them. the very large diversified universal banks like jpmorgan and citigroup don't really have that much commercial real estate exposure compared to the total. >> who's most vulnerable? >> generally speaking it's some of the names are not the ones i personally cover, some of the smaller to mid-sized regional banks, who overextended as a percentage of their total assets into commercial real estate.
they tend not to be the largest banks in the country, that's why we're not worried about the systemic risk. >> sheila bair says smaller banks could fail. as we go into the last quarter of the year, do i want to put new money to work in this new sector right now? >> we would lean toward the names that don't have the commercial real estate exposure. and that are not even dealing with significant credit costs. such as goldman sachs, that's our top pick. and also jpmorgan, because they don't have that much exposure, as i said. and because they have a nice balance between the capital markets and the more traditional lending side. >> what about regulatory changes? today we're seeing the federal reserve is really watching compensation, that's one thing. a lot of people worry that's going to impact talented people working at these banks. then, of course, with the financial reform on the table, you are going to see bigger
government and more oversight. does that cut in any way? >> it could. the thing we're worried about the most, actually, is the degree to which regulation might force down the profitability of some core businesses, such as commodities, and derivatives. although we're actually confident that the legislation, or regulation which is going to pass, is going to be reasonable, because i think that governments around the world are sensitive to not completely destroying liquidity in the market. so we think that it will be reasonable regulation, and not out of line with what the markets really need. >> guy, thanks so much. >> my pleasure. >> good to see you. head of u.s. financial institutions research at bank of america securities, merrill lynch. we've got about 35 minutes before the closing bell sounds on wall street. the dow industrials up 55 points right now at 9,039. nasdaq up higher by about ten. find out why the markets may be setting themselves up for a
operator upgraded from buy to sell for with an $18 price range. citing stronger results in atlantic city. baker hughes, increasing optimism about the company's international growth strategy in the oil and gas services industry. and citigroup downgrading health insurance companies, united health and coventry health to hold from buy. united is facing headwinds. >> we turn on our cnbc investor network straight from new york stae today. lucas is with us, standing by. good to talk with you, lucas. what are you doing in this market today and over the last, i guess, six months? >> well, maria, we've been trying to stay ahead of the beta chase, i like to say. trying to sort of buy stocks that are really exposed to the decline in the dollar and that really tend to move more than the market is moving on its own. looking around at stocks that aren't moving, like the big cap
oil, exxon or chevron or conoco. then you could look at the other names, enp index. stay long those and short the bigger ones. you've got yourself kind of hedged moneywise. and you have real performance on your hands. >> you think the dollar continues trading lower? >> well, i think you have to keep a careful eye. because that's the one thing that derails this rally. as long as it does, you can keep playing. >> what is the other asset classes, like commodities? what's going on there? we had a huge move in gold and oil and so many other commodities. are you a buyer? >> well, you know, i think you have to be very nimble. i think that if you're going to go to the dinner party and you want to play, you have to make sure that you leave when the host wants you to. if you stand around too long, there could be a lot of downside to some of these things. it's my opinion that when we see gold so strong, and so strong here at 1,000, oil holding the $70 level, as long as the dollar slowly moves lower, and the economy gradually improves,
you'll have outside gains in these sort of beta plays in energy, and in materials. >> all right. thanks so much. good to talk with you, lucas. have a good weekend. >> great. thanks a lot, maria. you, too. nasdaq holding on to a ten-point move. >> our next guest says there's been excessive amounts of put buying on the s&p 500 versus the s&p 100. of the "closing bell" returns.
welcome back. final stretch here. we've got the market closing in about 25 minutes. it is higher. up about 2.5% for the week. today, up another .5%. the best levels of the afternoon, you have money moving into technology. certainly that's a big leadership group. interl up 1.5%. that's a dow component. on nasdaq as well. google, ebay, apple computer, all higher. financial services are also doing well. citigroup is up better than 1%. goldman sachs, bank of america. morgan stanley up 1.5%. ge down today after a big runup
recently, as well as the oil companies turning lower right here. they started off higher, actually. nasdaq up ten points due to the strength in tech. >> maria, s&p 500 is up better than 55% since the march bottom. is it possible we could see the market add on another 10% to 20%. that's what we're talking about on today's "fast money" "final call." joining me from chicago, brian, an options action contributor. >> thanks for having me. >> what are we talking, 10%, 20% on top of what we already had? >> i was doing some thought about analysis, about all the put buying that we saw. going about ten days ago, we saw downside put buying, and i touched on this a little earlier today, that we saw the s&p 500, people coming in, buying put protection to the down side, where in the s&p 100, you didn't see that protection play. people want that broad market protection. and typically you'd say, well, they're buying puts on the down side, doesn't that mean the
market's turning lower. looking at the past statistics over the last decade, there's just a handful where this happened, that market actually moves higher, 10% to 20% over the next three to six months. >> that's the counterintuitive thing, a bullish move out of that put buying. >> exactly. people sometimes associate put buying with people grabbing volatility, grabbing fear. but actually this is a way of hedging yourself. people have made such nice profits off the runoff the bottom in march here. they're looking out and gaining protection by buying puts which gives you the right to sell stocks should the market fall farther. people can go in and buy more stock when the market pulls back because they have the protection in place. >> let's add another 10% to 20%. what is the time frame if that happens, when will it happen by? >> it doesn't necessarily happen right away, especially in the fall season. a tough time to actually be buying stock. however, it does happen and it's pretty consistent, three to six months out, you will see the market 10% to 20% higher. you definitely have to position
yourself for that. >> buying the dips in the market? >> exactly. you don't want to drive the market higher and reach and grab and buy here. what you want is when there's a dip in the market or pullback, like people used puts for protection on the pullback, you buy and get longer on any pullback you see in the market. >> i see you like technology. if you break that down into different sub-sectors of tech, if you will, apple obviously has been strong, oracle came out with disappointing numbers on the sales side of thing. do you like tech as a blanket or selective in what you're picking? >> i think you have to be a little more selective. a few months ago you could find any tech name higher than it was a few months ago. now you have to be a little bit more careful. people were selling microsoft put, meaning they're willing to get microsoft down around the $20, $21 level. they were selling puts all the way out to 2011. certainly microsoft is a name that may see bullish movement to
the upside. i also like oracle on a pullback. you mentioned that before. some of those high names right there. but you definitely have to be selective. >> quickly on the inflation scenario, how are you playing gold, how are you playing energy right now? gold a big story. down right now, but still $1,010 an ounce. >> gold breaking out above $1,000 could indicate inflation down the road, or at least gold prices moving a lot higher. what i did is i went out and defined my risk. as an option trader, i wanted to risk less to trade more. i i took a look at sun core energy. i bought some calls and sold downside puts in there. i looked at slumberger. willing to get long this stock. >> otherwise known as slumber jay, right? >> exactly. have a good friday. have a good weekend. >> you, too. is the jobless recovery in the cards. "fast money" has an exclusive
interview with labor secretary hilda solis. google, the top analysts, as your play for next week. melissa and the traders are live at 5:00, maria. >> 20 minutes before the close. >> up next, we're talking strategy with morgan stanley chief investment strategist, david darth. wow. >> now it's morgan stanley smith barney. >> exactly. i couldn't spit that out quite well. which sectors and stocks can outperform the market for the rest of the year. exclusive interview with ebay ceo john done a hoe. he is joining me to talk about tech. and how ebay is planning to improve its revenue growth at 4:00 p.m. eastern. and you get to choose any car in the aisle. choose any car? you cannot be serious! okay. seriously, you choose. go national. go like a pro.
good to see you, david. >> thanks for having me. >> let's talk a little about the investment strategy. after the runup that we've seen, does that dictate a change, a shift in terms of how you allocate money right now? >> you want to be on guard, maria. september, since 1900, has traditionally lost 1.1%. thus far, through today, it's up 4.4%. this is an anomaly. the market wants to run, don't fight that too hard, but be on your guard. we say it's shifting from this past spring, the recovery, it was psychology and it was stimulus. the next phase for us to go higher is consumer, corporate spending and hiring and corporate profits. you've got to have the consumer come back and you've got to have those profits start to come through. we do see people in the semi conductor business, personal computers, luck ri products, talking in a very constructive vein. the shipping companies this past
week, the big package shippers, how they've been talking about seeing a little bit better tone to things. >> but the shipping index is down. >> baltic shipping index fell from 11,000 to 700. it then quadrupled to 3,000. it's 2,400 this morning. it has come off. >> isn't that as maria said before, it is an important indicator of future economic activity. >> it's an indicator of future economic activity. it's another indicator of chinese import demand for coal, for iron ore, for things that are dry goods, scott. it is also an indicator of banks' wigness to finance global trade. that's why it fell so precipitously last summer. >> let me ask you about the dollar. this rally that we've seen, the backbone has been the weak dollar. it has to run out at some point, and when? >> the weak dollar is the third part of the stimulus package. the stimulus is federal
government spending. then you have low interest rates, quantitative easing. expansion of the money supply, all right? you have all those things. the third one, which the united states has got to do in a very careful way, is to basically ease off the currency and take it down and continue to get that export strength. we're getting our streng economically from a slight upturn in housing, a slight cash for clunkers, the auto sales, and exports. you've got to basically buy time until the consumer can come in. it's like a picture for the new york yankees where you're waiting for rivera to come in and be the closer. the closer will be the consumer. we're not having that yet. the weakening in the dollar, you don't want to cause people at pittsburgh next thursday/friday to start talking about that stuff on the 24th, 25th. >> they're talking about it -- i mean, in terms of publicly talking about it. >> maria, you've been in jackson
hole, london, you've talked to these folks all over the world and it is in the back of their minds is the overhang and overflow of dollars. so the united states has got to be very judicious, very, very measured in taking that dollar down. look, we talked a few moments ago, the 90-day treasury bill is nine basis points. so the bond markets at the short end are still expecting a very choppy, anemic recovery that the consumer does not come back to. the stock markets are pricing in, and look, we had so much damage, it fell 57%. they're pricing in a much smarter, morrow bust advance right now than the bond market is. beal see who's right, scott. >> isn't it true, david, that the consumer doesn't necessarily have to be there at the beginning of the recovery? can't the consumer come in a little bit later and isn't that traditionally happens anyway? >> they better come in over the holidays. >> you have the traditionally, the united states of america, your recession has been manufacturing, autos and housing.
today, manufacturing is a less important part of the economy. you used to have 18 million workers, now you've got 11 million people in manufacturing, okay? it's less important. the cash for clunkers helped a little bit on the short-term basis. and housing has started to turn up. and traditionally, the powerhouse underlying driver has been the consumer, who's been there through thick and thing. they didn't really cut back. this time they have. you saw the july credit numbers, minus $21 billion. okay? wall street was expecting minus $4 billion. that is consumer credit. people are still in a hibernation, caring about their financials, caring about their borrowing type of mode. as long as that happens, if that continues, and we don't see the consumer, as you said, the party can start without the consumer -- >> that's what i said last time. the consumer can come in fashionably late and that's okay. >> you said it last time, and i remember it like i'm dropping
acid here on the show, okay? i feel like i'm having an lsd flashback talking to you from last week. >> this is a family program. >> okay. >> let's talk about strategy here. >> good segway. >> the strategy being investing, going into year end, knowing that we just came off of this huge rise. we're going into, let's not forget, third quarter earnings period, because once the quarter ends the end of september, we get into the pre-announcement season and into 2010. give me your recommended portfolio, equities, other asset classes, treasuries, and where does international fit in there? >> maria, we've been in the process, now that we're merging together, morgan stanley and smith barney, globalizing all of the asset classes. equities, we used to have a very heavy u.s. country bias. today we've moved it to 50/50, with emphasis on canada,
australia, and emerging markets. we're boding in favor of global growth more outside the u.s. than inside. we're underweight in the equity category, u.s., japan and europe. the developed underweight, overweight and emerging marks and canada and australia. in bonds, we're staying away from government bonds since the yields are so low. we're in the high yields, into high grades. >> taking more risk on? >> taking more risk on. you are taking more risk on. you're assuming that that recovery is going to continue to build momentum. >> how about munis? j a very good place for the taxable investors to hold municipal bonds, to have municipal bonds in place of the government and instead of the corporate. alternatives, real estate investment trust and commodities, and a small smidgen of inflation protected securities. >> i've got to ask you about, my producer is interested in this.
probably something our viewers also want to know about, and that is obviously the money market situation. you know, treasury officially ending its year-old program to guarantee money market mutual funds today. the program was set up, as you know, last year. after the reserve funds had a run on assets because of lehman. what about that? >> well, i think they've done a phenomenal job. people like to sit and criticize and so forth and so on. but when it was needed, they had to come in and put the government's balance sheet in there to support the balance sheet. there's a huge long article by james stewart in this week's "new yorker." i'm sure you've read it, maria. it's like 20 pages. it's very long. and the key that he feels was this support action to back basically the treasury was saying for the money market fund industry, there were $4 trillion. that would have gone into a panic mode. the government knew they had to step in. one of the things that some of
my colleagues at morgan stanley, i've got to give them credit, morgan stanley smith barney, they said when the government starts panicking, it's time for investors to stop panicking. that means the government basically said, uh-oh, we've got to back stop the money market mutual fund industry. that was a time for all of us to start getting into emerging markets, and to risk assets. >> we'll leave it there. we have lots of applause going on right below us. >> maria, i came in with the service men and women. i hope that's -- >> the secretary of defense and chief of staff, ringing the bell in honor of the p.o.w./m.i.a. recognition day. that's why you have the applause on the floor of the nyse. >> it's good to pay recognition to our heroes and heroines.
investors waiting for a huge turn-around in the third quarter results in financials may be in for a big surprise. matt nesto is here to explain. >> it's all about the f in financials. there's funky stuff going on here. we all know the financials have been the market leader, whether it's three months, or from the bottom, or whatever. they're also the market's loser from a year ago and from the peak. but the fact remains, if you take a look at the latest earnings estimate from thompson reuters, my boys up in boston just send me this note, if you look at the s&p, the total estimate for the third quarter minus 22%, that will be nine consecutive quarters of losing,
or declining earnings. the third quarter estimate for the financials, as we said, up 337%. my god. well, if you back out just two little stocks of the 80 in the financial index, aig and citi, look, oh, my lord. down to minus 17%. quite a disappointment, isn't it. well, it's interesting, obviously those stocks up about 40% during that period of time. but there's lots of ways to look at it. just keep in mind when you start seeing huge rebounds in earnings numbers for the financial sector. another thing to watch is going to be energy. because the energy group is among the worst in terms of the forecast there. but if you back out energy, that minus 22 estimate for earnings, goes to just minus 7. so fun with numbers. scott, back to you. >> that is funky. >> yeah. absolutely. back with the closing countdown? >> we'll be right back. my one-on-one with president bill clinton.